Google Said to Face U.S. Probe Over Motorola Patents

By Sara Forden -
Jun 30, 2012

A U.S. antitrust regulator has
opened a formal probe into whether Google Inc. (GOOG)’s Motorola
Mobility unit is honoring pledges it made to license industry-
standard technology for mobile and other devices on fair terms,
three people familiar with the situation said.

The Federal Trade Commission has issued a civil
investigative demand, which is similar to a subpoena, to the
owner of the Android mobile operating system as it scrutinizes
whether Google is improperly blocking rivals’ access to patents
for key smartphone technology, one of the people said.

The agency is also seeking information from companies
including Microsoft Corp. (MSFT) and Apple Inc. (AAPL) as it investigates
whether Google intends to license technology under patents that
help operate 3G wireless, Wi-Fi and video streaming on fair and
reasonable terms, another one of the people said. The people
declined to be identified because they weren’t authorized to
speak publicly about the matter.

Another focus of the FTC probe, the person said, is
Google’s decision to continue litigation started by Motorola
Mobility over industry-standard patents before Google bought the
company. Those lawsuits could end up blocking imports of popular
consumer products such as Microsoft’s Xbox and Apple’s iPhone
and iPad.

Industry-standard technology helps ensure that different
manufacturers’ products, such as mobile phone antennas and
global-positioning system software, work together. Companies
that create technology that helps develop the agreed-upon
industry standard pledge to license patents for those inventions
on reasonable terms.

Serious Commitments

“We take our commitments to license on fair, reasonable
and non-discriminatory terms very seriously and are happy to
answer any questions,” Niki Fenwick, a Google spokeswoman,
said.

Patent litigation is escalating as handset and device
makers vie for increasing shares of the worldwide mobile-device
market, projected to reach $360 billion this year, according to
estimates by Yankee Group, a Boston-based research firm. The
global patent fights heated up in March 2010, when Apple filed
its first complaint at the International Trade Commission
against Android-phone maker HTC Corp. (2498)

“Antitrust agencies around the world are worried about
this patent problem, which is particularly important as we shift
to mobile technologies,” said Bert Foer, president of the
American Antitrust Institute in Washington, which advocates
strong enforcement of antitrust law. “An injunction against the
use of a patent can destroy a company’s entire market
strategy.”

Essential Patents

FTC Chairman Jon Leibowitz said March 30 the agency was
“looking at” the legality of companies seeking to prevent
rivals from using patents that cover technology considered
essential for an industry.

Dominic Carr, a spokesman for Redmond, Washington-based
Microsoft, confirmed the company received a civil investigative
demand from the FTC, declining to comment further. Steve Dowling, a spokesman for Apple, based in Cupertino, California,
and Cecelia Prewett, an FTC spokeswoman, declined to comment on
the investigation.

The FTC investigation follows the opening of formal probes
of Motorola Mobility and Samsung Electronics Co. (005930) for the same
issues by the European Commission earlier this year.

U.S. antitrust regulators have agreed the FTC will focus on
Motorola Mobility and the Justice Department will scrutinize
Samsung Electronics Co.’s handling of industry-standard patent
claims, said another person familiar with the matter. The person
didn’t know if the Justice Department has issued information
demands in connection with its review of Samsung.

Antitrust Probe

The FTC is already conducting a broad antitrust
investigation into whether Google’s search-results rankings and
other business practices harm competition.

Earlier this month, the FTC filed a statement with the ITC,
which is charged with protecting U.S. markets from unfair trade
practices, suggesting that companies should be limited in their
ability to win orders blocking imports of competitors’ products
over the use of patents built into industry-wide standards.

The ITC said June 26 it would review whether Apple, which
gets about 75 percent of its revenue from the iPhone, iPad and
related products, infringed four patents held by Motorola
Mobility. A trade judge in April said Apple infringed one of the
patents.

Blocked Imports

Should the ITC side with Motorola Mobility, the agency has
the power to order U.S. Customs and Border Protection to stop
iPhones and iPad computers made in Asia from entering the U.S.
On July 2, the ITC is scheduled to announce whether it will
review a trade judge’s findings that Microsoft’s Xbox gaming
system infringes four of five Motorola Mobility patents.

In February, the Justice Department approved Google’s $12.5
billion purchase of Libertyville, Illinois-based Motorola
Mobility, which gave the biggest maker of smartphone software
more than 17,000 additional patents in the largest wireless-
equipment deal in at least a decade, according to data compiled
by Bloomberg.

At the same time, the department also approved the
acquisition of Nortel Network Corp. patents by a group led by
Microsoft and Apple, as well as Apple’s acquisition of some
Novell Inc. patents.

In approving the deals, the Justice Department said it
would monitor for potential misuse of those patents, which cover
such technologies as location services, antenna designs and
touch-screen motions.

Patent Pledge

Microsoft and Apple pledged they wouldn’t seek to block use
of any standard-essential patents. Google said it wouldn’t,
either, as long as good faith negotiations were under way, while
maintaining the right to seek court orders if no agreement could
be reached on licensing. Microsoft and Apple “seemingly won’t
accept any price,” Kirk Dailey, vice president of intellectual
property for Motorola Mobility, said June 20.

Makan Delrahim, an antitrust and intellectual property
lawyer with Brownstein, Hyatt, Farber, Schreck LLP, said
antitrust agencies shouldn’t be involved in what are essentially
contract disputes.

“Determining whether someone has lived up to its
commitments to the standard-setting organization isn’t an
appropriate role for an antitrust agency,” Delrahim said.